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In the US, contractors typically work as W-2 employees of the agency.
The agency is then obligated to pay the Social Security withholding
(which used to be 7.5% of the employee's wages and the employee pays the
same amount through withholding) and I believe in most cases they're
also required to pay a certain amount to the unemployment compensation
fund of the employee's state of employment. These payments come out of
the difference between the amount the agency bills the client and the
amount the agency pays the employee, so that difference is not all
profit for the agency.

This is beneficial to me as a contractor because when the assignment
ends, I can file for unemployment compensation... that helps me pay the
bills between assignments. Were I a 1099 contractor, I would be an
independent contractor and would not be eligible for unemployment
compensation, there would be no withholding of state and federal income
taxes, and I would have to pay self-employment taxes and the full 15%
Social Security withholding with my annual tax filing. There's probably
other things I'm not really familiar with but those are the basics that
I'm aware of.

In all the years I have done contract work and having about six
agencies, represent me at different times, I have never encountered
this situation. It has always been understood that a recruiter will
only submit my application to the positions I have discussed and
authorized.

How does the recruiter even know of your availability and whether or
not you agree to the work and the rate?

> (basically, he tells me that they'll only make maybe 50Â per hour on
me).

I call B.S. on that statement! This guy is clearly lying!

Or... maybe it is different in the U.S.? In Canada, agencies typically
make around 45% of what the contractor is paid. The most outrageous
agency fees was during my first contract job where the agency took
68%. I was shocked when my manager told me what they were really
paying for my services! Thankfully, those crooks are out of business now.

Good luck, I hope you get the contract.

Best regards,
Shawn

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